Would President Romney Sell Uncle Sam's GM Stake?

Agenda-Setting Financial Insight.
Feb. 16 2012 11:39 AM

Pragmesidential: Would President Romney Really Sell Uncle Sam's GM Stake?

137343581
Republican presidential hopeful Mitt Romney urged the Obama administration to sell its investment in General Motors this week, but did he mean it?

Photo by EMMANUEL DUNAND/AFP/Getty Images

Mitt Romney may be unsure which hat to wear when it comes to General Motors. In a Detroit News article this week, the Republican presidential candidate exhorted President Barack Obama’s administration to offload Uncle Sam’s holding in the automaker, which reported fourth-quarter earnings on Thursday. That may be Political Romney’s take, but selling now would leave taxpayers with a hefty loss. That’s a hit Private Equity Romney would surely avoid. 

Romney is right that governments should try not to hold long-term positions in private companies. So if the U.S. government were to sell its 32 percent of the Detroit automaker immediately, that would superficially satisfy Romney’s belief in free-market capitalism. 

But at Wednesday’s closing share price, doing so would leave taxpayers shouldering a $14 billion loss on their GM investment - almost a third of what Presidents George W. Bush and Barack Obama poured in to keep the company on the road. Not only would crystallizing that loss offend Romney with his private equity background. It’s also a sure bet that Romney the presidential candidate would have pounced on it as evidence of Obama’s fiscal irresponsibility. 

Of course, it’s not quite the same as a private equity investment - price shouldn’t trump everything else. The U.S. government invested in GM, Chrysler and hundreds of banks to keep them afloat, not to make a profit. Even so, it isn’t hard for the government to explain why it’s OK that it still holds a significant stake 15 months after GM went public. 

Executive pay aside, officials have not interfered with the automaker’s business; the fact that its investment has largely been a non-issue for months speaks to that. And the Treasury has proved adept at getting out of other bailout positions relatively quickly and at a profit - just the kind of responsible approach Romney advocates. That should give non-partisans comfort that the GM stake is receiving the same treatment. 

There’s also a reasonable case that GM’s market value will rise over the next year or more as it continues working on its turnaround, especially in its loss-making European operations. If Romney finds himself in the Oval Office next year and he’s able to sell the GM stake at a profit, both his political and private equity personas will find it hard to resist taking the credit.

Read more at Reuters Breakingviews.

Antony Currie has more than a decade of experience as a financial journalist, having worked with Euromoney since 1996, most recently as a US editor. He has worked on assignments in the major financial centres of Europe and the US and written stories on capital markets, global economies and the investment banking industry.

TODAY IN SLATE

Medical Examiner

Here’s Where We Stand With Ebola

Even experienced international disaster responders are shocked at how bad it’s gotten.

It’s Not Easy for Me, but I Stand With Emma Watson on Women’s Rights

Divestment Is Fine but Mostly Symbolic. There’s a Better Way for Universities to Fight Climate Change.

Subprime Loans Are Back

And believe it or not, that’s a good thing.

It Is Very Stupid to Compare Hope Solo to Ray Rice

Building a Better Workplace

In Defense of HR

Startups and small businesses shouldn’t skip over a human resources department.

Why Are Lighter-Skinned Latinos and Asians More Likely to Vote Republican?

How Ted Cruz and Scott Brown Misunderstand What It Means to Be an American Citizen

  News & Politics
The World
Sept. 23 2014 10:55 AM This Isn’t the Syria Intervention Anyone Wanted
  Business
Business Insider
Sept. 23 2014 10:03 AM Watch Steve Jobs Tell Michael Dell, "We're Coming After You"
  Life
The Vault
Sept. 23 2014 10:24 AM How Bad Are Your Drinking Habits? An 18th-Century Temperance Thermometer Has the Verdict.
  Double X
The XX Factor
Sept. 22 2014 7:43 PM Emma Watson Threatened With Nude Photo Leak for Speaking Out About Women's Equality
  Slate Plus
Slate Plus
Sept. 22 2014 1:52 PM Tell Us What You Think About Slate Plus Help us improve our new membership program.
  Arts
Brow Beat
Sept. 23 2014 9:42 AM Listen to the Surprising New Single From Kendrick Lamar
  Technology
Future Tense
Sept. 23 2014 10:51 AM Is Apple Picking a Fight With the U.S. Government? Not exactly.
  Health & Science
Bad Astronomy
Sept. 23 2014 11:00 AM Google CEO: Climate Change Deniers Are “Just Literally Lying”
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.